Republicans question SEC on Madoff conflicts

By IBT Staff Reporter On 03/03/11 AT 6:24 PM

Two Republican lawmakers are probing a decision by the U.S. Securities and Exchange Commission to let the agency's top lawyer handle matters concerning Bernard Madoff, even though his deceased mother had invested with the swindler.

House Oversight Committee Chairman Darrell Issa and the Senate Judiciary Committee's top Republican, Charles Grassley, said on Thursday they had sent an inquiry to SEC Chairman Mary Schapiro asking questions about why SEC General Counsel David Becker was allowed to advise the commission on Madoff matters.

Becker, who left the SEC just days ago, at the end of February, is currently being sued by Madoff trustee Irving Picard along with his two brothers. The suit does not accuse them of knowing about Madoff's Ponzi scheme, but it seeks $1.5 million in alleged phony profits their mother's estate received through Madoff investments.

The lawmakers called the lawsuit against Becker alarming. Schapiro is slated to testify before Issa's committee next Thursday.

Becker's participation in any aspect of the Commission's involvement with the aftermath of Madoff's fraud suggests multiple conflicts of interest, Issa and Grassley wrote. It has also subjected the Commission to further questions about its management and independence.

House Financial Services Committee Chairman Spencer Bachus and oversight subcommittee chairman Randy Neugebauer recently made similar inquiries with the SEC.

In a letter to Bachus and Neugebauer, Becker said he disclosed his mother's Madoff investments to the SEC's ethics counsel when he joined the SEC in February 2009. He was advised it would not pose a conflict.

Later in May 2009, he sought ethics guidance again when the SEC was asked to recommend a method of valuing net equity to determine which Madoff victims could file claims.

Becker said he recognized this issue could affect his financial interests because it could affect the trustee's decision to bring clawback actions against persons like me. But the SEC's ethics lawyer said the issue would not have a direct and predictable effect on the trustee's decision to bring clawback actions and allowed Becker to participate.

On his last day at the SEC, Becker made a trip to Capitol Hill to discuss the issue with Issa's and Grassley's committees. But in their joint letter, they said they still had concerns.

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